![\"\"](\"https:\/\/capitalcambodia.com\/wp-content\/uploads\/2019\/10\/Page-4-1.jpg\")
Asian Development Bank Financial Sector Specialist<\/figcaption><\/figure>\n
\u201cA numbers of microfinance institutions have a strong focus on reaching unbanked, low-income households, especially in rural areas,\u201d notes Kea Borann, president of the Cambodia Microfinance Association (CMA).<\/p>\n
Last year 97 percent of all businesses in the Kingdom were made up of micro or small-to-medium enterprises, according to the Ministry of Industry and Handicraft.<\/p>\n
The ministry also reported that 95 percent of them were not properly registered and that in excess of 50 percent of those businesses struggle with financial and labour constraints.<\/p>\n
Access to finance is therefore a key element of inducing growth for such a large majority of businesses, but with more than 2 million Cambodians owing money to MFIs and numerous warnings from the International Monetary Fund and the World Bank, critics argue that more needs to be done to slow the growth of credit among low-income families.<\/p>\n
\u201cAlmost 50 percent of clients who borrow from MFIs borrow less than $1,000. Please also note that the loans from MFIs are generally lent to households with about three members who earn an income,\u201d says Kea.<\/p>\n
As of 2017, the CMA agreed to cap interest rates at 18 percent, whereas previously they had been capped at 30 percent, although this did encourage certain lenders to actually raise their rates to the height of the new cap.<\/p>\n
This was a fresh attempt to slow down the growth of MFI credit in Cambodia, following a 2016 agreement not to lend to borrowers who already had two relationships with MFIs in order to prevent new debts being used to pay off old ones.<\/p>\n
Ainabe of the ADB notes that the IFDSP \u201csupported reforms that improved institutional arrangements across key government agencies required for effective crisis management and a deposit protection scheme to promote depositor confidence amid the rapidly expanding bank and MFI deposit base\u201d.<\/p>\n
Stronger regulations, coupled with an adoption of fintech solutions within the financial sector, she hopes, will minimise the cost of credit as well as provide formal, regulated and secure access to finance for the rural poor and microenterprises, which, she fears, may resort to informal credit providers. This, she argues, would ultimately result in over-indebtedness of poor households.<\/p>\n
But measuring success on such a large scale becomes difficult, as many metrics compete for the creation of the bigger picture.<\/p>\n
Kimlong Chheng is director of the Centre for Governance Innovation and Democracy of the Cambodian think-tank, Asian Vision Institute. He says: \u201cIn general, there has been a general increase in financial literacy over the years because of MFIs, NGOs, and development agencies. While the aim of the policy is to increase financial access, inclusivity and literacy, the impacts and outcomes can be difficult to assess,\u201d he says.<\/p>\n
\u201cThere are those who have benefited and those who have been unsuccessful in utilising the loans. To be fair, the policy is good but it cannot lift all borrowers out of poverty.\u201d<\/p>\n
With the ADB\u2019s work far from over, Ainabe hopes to build on the progress made towards a Cambodia that is less reliant on microloans and offers an accessible financial sector that can support people in the development of their businesses.<\/p>\n
Ainabe says: \u201cThe government has plans to implement a number of initiatives, some of which are already under way, including, improving banks\u2019 capital adequacy ratios, a phased implementation of a capital conservation buffer, a new liquidity risk management framework, improvement of banks\u2019 loan classification and improvement of the supervision of MFIs.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
Asian Development Bank\u2019s next phase for financial inclusion<\/p>\n","protected":false},"author":3,"featured_media":2893,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_FSMCFIC_featured_image_caption":"File photo taken on Sept. 16, 2008 shows the logo of the Asian Development Bank (ADB) at its headquarters in Manila, capital of the Philippines. (Xinhua\/Liu Hua)","_FSMCFIC_featured_image_nocaption":null,"_FSMCFIC_featured_image_hide":null,"footnotes":""},"categories":[3],"tags":[38,656],"yoast_head":"\n